Quarterly production down 8% to 4.8 MMboe and quarterly revenue up 1% to $408 million
- Gas production impacted by planned and unplanned plant downtime and lower customer nominations
- Five Western Flank oil well connections delayed to H2 FY23 due to weather and supply chain challenges
- Higher production from the Cooper Basin JV (+8%) and Perth Basin (+10%)
Perth Basin net 2P reserves reduction of 11% (10.6 MMboe); 3.7% of Beach 2P reserves at 30 June 20221
- Review of Perth Basin reserves undertaken following the Waitsia Stage 2 drilling campaign
- Ability to supply 3.75 Mt of LNG volumes and meet domestic gas commitment remains unchanged
- No impairment of Perth Basin carrying values Execution of agreements imminent with preferred contractor for delivery of Waitsia Stage 2
- Separate market announcement to be made once agreements have been reached Otway Basin connections on schedule for mid-2023, subject to Operational Environmental Plan approval Overall 89% success rate from 44 wells completed
- One gas discovery from the first two wells of the Perth Basin exploration campaign
According to the company’s website press release on January 31, 2023:
Comments from Chief Executive Officer, Morné Engelbrecht
“Beach is navigating a challenging period while we work hard to deliver our major growth projects in the Otway and Perth basins. While we have announced a reduction to our Perth Basin 2P reserves following the Waitsia development drilling campaign, we remain confident in the Perth Basin as a major growth area including our ability to supply 3.75 Mt of LNG volumes to bp and meeting our domestic demand commitment. “We are preparing to connect four offshore Otway Basin wells which remain on target to deliver first gas by mid-2023, subject to regulatory approvals. Once this work is complete, it will allow for up to 100 terajoules per day of additional gas supply to be made available for the East Coast market. “The execution of agreements are imminent with the preferred contractor for delivery of the Waitsia Stage 2 project. The Joint Venture has worked with Clough administrators to ensure employees, subcontractors and suppliers continue to get paid, allowing the Waitsia Gas Plant construction to continue during this difficult time", Mr Engelbrecht said.
Financial
Sales volumes Total sales volumes of 5,158 kboe were 3% lower than the prior quarter. Oil and condensate sales volumes were higher due to the one-off reduction in Q1 FY23 volumes from new arrangements for processing of Beach’s Cooper Basin oil and liquids, which took effect from 1 July 2022. Further information is contained in the FY23 First Quarter Activities Report, released 19 October 2022. Lower gas sales volumes were mainly due to planned and unplanned plant outages which reduced production.
Sales revenue
Total sales revenue of $408 million was 1% higher than the prior quarter. Oil and condensate revenue was higher due to the one-off non-cash reduction in Q1 FY23 oil and condensate sales volumes and revenue from new arrangements for processing of Beach’s Cooper Basin oil and liquids, which took effect from 1 July 2022. Gas and LPG revenue was impacted by lower production and lower realised pricing.
The average realised sales price across all products of $79.1 per boe was 4% higher than the prior quarter. The average realised oil price decreased by 10% to $141.1 per bbl and the average realised gas price decreased by 1% to $8.4 per GJ.
Liquidity
As at 31 December 2022, Beach had total liquidity of $609 million (Q1 FY23: $638 million), comprising cash reserves of $189 million and undrawn debt of $420 million. Movements in liquidity were in line with expected short-term funding requirements to complete major growth projects. A net cash position was maintained during this capital-intensive period.
Hedging
As at 31 December 2022, Beach had no hedging in place.
Capital initiatives and FY23 half-year results
Beach’s FY23 half-year results will be released on 13 February 2023.
Beach intends to accompany the FY23 half-year results with announcement of capital management initiatives which will aim to provide the basis for transparent returns to shareholders.
FY23 full-year DD&A guidance
To support estimations of Beach’s FY23 full-year earnings, DD&A guidance of $410 – 440 million is provided (FY22: $376 million). Higher DD&A in FY23 reflects previously announced revisions to Beach’s reserves position as at 30 June 2022 and the outlook for FY23 production volumes and mix, including a greater contribution from the Otway Basin which is a higher depreciating asset.
Perth Basin
Production
Total gas production of 387 kboe was 10% higher than the prior quarter due to high uptime rates and strong customer demand. The Beharra Springs Gas Plant and Xyris Gas Plant operated steadily at rates of ~22 TJ/day gross and ~27 TJ/day gross, respectively. A six-day annual shutdown at the Beharra Springs Gas Plant was undertaken during the quarter.
Waitsia Stage 2 drilling results
The six-well Waitsia Stage 2 drilling campaign was completed at the end of October 2022 and pressure data acquired from Waitsia 4 last week added important data to the assessment of the drilling results and the update on reserves.
The Waitsia field comprises reservoir units in the Kingia and High Cliff sandstone formations, with the Kingia the primary reservoir. Reservoir characteristics of the Kingia were largely consistent with pre-drill expectations. Four of the six wells tested in-line with expectations at rates up to an equipment constrained 68 MMscfd. There was variance in reservoir depth with some wells high and others low to prognosis due to usual seismic interpretation uncertainty.
The final well, Waitsia 10, tested the western extent of the field. Despite no indication of gas, Waitsia 10 encountered high quality Kingia reservoir in what is interpreted to be a separate waterbearing compartment. The well was plugged and suspended pending a decision on future options, including potential sidetrack of the well.
The High Cliff reservoir is not as well developed across the field as expected, meaning its ability to store and flow gas is more challenged. Four wells of the campaign targeted the High Cliff reservoir and gas was intersected in three wells.
Waitsia operator Mitsui last week took pressure measurements in the Waitsia 4 well, the results of which have helped further define the reservoir in the southern part of the field where there is less well data. Beach has assessed the impact on reserves from the drilling campaign and the pressure tests performed last week.
Beach typically commences the annual reserve audit process during March, with completion in August of each year, however given recent drilling results, the Company has undertaken a review of Perth Basin reserves for FY23. An independent auditor will review the reserves.
Volumetric assessment indicates a Perth Basin net 2P reserves reduction of 11% (10.6 MMboe). The reduction in 2P reserves is primarily driven by increased structural complexity in the Waitsia field and poor reservoir quality in the High Cliff reservoir at Waitsia.
Following completion of the drilling campaign, Beach remains confident in fulfilling its LNG supply volume of 3.75 Mt under its Sale and Purchase Agreement with bp (announced on 8 August 2022) and meeting its domestic gas commitment.
Waitsia Gas Plant update
Construction of the 250 TJ/day Waitsia Gas Plant continued throughout the quarter with several key milestones achieved on site and at the North West Shelf Karratha Gas Plant, including:
- Completion and commissioning of the Karratha Gas Plant tie-in to enable backhaul of gas molecules;
- Delivery and installation of all four export gas compressors on site;
- Construction and installation of the electrical switchroom;
- Cable connection of all major equipment and commencement of cable pulling to the switchroom;
- Installation of the hot water heating system;
- Installation of the mercury guard bed; and
- Construction of all administration buildings.
Exploration drilling
The Perth Basin gas exploration campaign commenced during the quarter with the first two wells of the campaign, Elegans 1 and Gynatrix 1, drilled in the L2 and L1 Mitsui-operated permits. Beach’s pre-drill estimates indicated these were higher-risk prospects, with probabilities of success of 17% and 24% for Elegans 1 and Gynatrix 1, respectively.
Elegans 1 failed to intersect gas and was plugged and abandoned. Gynatrix 1 intersected six metres of net gas pay across a 37 metre gross section in the target Kingia reservoir. Production testing will be undertaken later in 2023 or early 2024.
Beach’s first operated well, Trigg, 1 is ontrend and up-dip from the West Erregulla gas field and the recent South Erregulla discovery and presents as a robust analogue to the Lockyer Deep gas discovery. Spudding of Trigg 1 is expected in early Q4 FY23 following completion of rehabilitation work currently underway in the Hovea field.
Following Trigg 1, drilling of Beharra Springs Deep 2 and Tarantula Deep 1 is planned and other wells are also being considered.
Otway Basin (Victoria)
Production
Total gas and gas liquids production of 1.0 MMboe was 25% below the prior quarter. A five-day shut-down of the Otway Gas Plant in October enabled tiein activity for the Thylacine development wells. Weather impacts on platform activities and unplanned compressor maintenance resulted in production below capacity during November. Lower customer nominations in December also contributed to the quarterly production decline. Average daily gas production was 89 TJ/day gross from the Otway Gas Plant (Q1 FY23: 120 TJ/day gross).
A planned shutdown of the Otway Gas Plant is scheduled in Q3 FY23. Routine turbine maintenance and further tie-in activity for the Thylacine and Enterprise wells will be undertaken during the 10-day shutdown in March.
Offshore Otway development
Connection activities continued for the four recently drilled offshore Thylacine development wells. Once connected to the Otway Gas Plant, these wells are expected to enable production at full nameplate capacity of up to 205 TJ/day. Activities during the quarter included:
- Departure of the Scandi Acergy subsea installation vessel from the UK in December 2022, with arrival in Australia expected in February 2023;
- Delivery of all major procurement items, including umbilicals, connecting pipes and spools, and hydraulic and electrical flying leads;
- Completion of all diving construction activities;
- Completion of all engineering activities; and
- Substantial progress on required modifications to the Thylacine platform.
Connection of the Thylacine wells is on schedule and awaiting approval of the Thylacine Installation and Commissioning Environment Plan. This final approval will allow for all outstanding connection activities to be completed.
Nearshore Enterprise development
In addition to connecting the four Thylacine wells, Beach is progressing connection of the Enterprise discovery to the Otway Gas Plant. Due to severe wet weather and having regard for land access negotiations, Beach is now targeting Enterprise coming online in mid-FY24, subject to receipt of these approvals. The Enterprise discovery was drilled from an onshore well pad in H1 FY21 and resulted in a 2P gas and associated liquids reserves booking of 34 MMboe gross (20 MMboe net to Beach), including 2P gas reserves of 161 PJ (gross). The discovery yielded liquids-rich gas and de-risked existing nearshore exploration prospects. Enterprise will provide Beach with optionality to market these new volumes beyond existing customer arrangements.
Otway Basin (South Australia)
Production
The Katnook Gas Plant was suspended during the prior quarter and no further production in FY23 is expected. The plant will be kept available for production in the event of future development or exploration success.
Exploration
Processing of the Dombey 3D seismic survey continued during the quarter. The survey covers 165 square kilometres in PEL 494 and captures the Dombey field and surrounding exploration prospects. It aims to assess opportunities to supply gas to the Katnook Gas Plant. Processing and interpretation of data to inform next steps is expected to be completed in H1 FY24.
Cooper Basin Western Flank
Production
Total oil and gas production of 0.9 MMboe was 2% below the prior quarter. Oil production of 652 kbbl was 3% below the prior quarter and gas and gas liquids production of 285 kboe was 2% higher than the prior quarter.
Oil production was supported by the 24-hour workover rig schedule which has cleared the backlog of optimisation, in-wellbore and maintenance projects. The workover rig will return to a 12-hour schedule in Q3 FY23. Despite this progress, supply chain and procurement challenges arising from prior rain delays and consequent changes to the drilling schedule saw five well connections planned during the quarter delayed to H2 FY23. Due to these challenges, at quarter-end there was a total of 10 drilled and unconnected oil wells, including five horizontal development wells, four appraisal wells and one exploration well. Subsequent to quarter-end, the Spitfire 11 horizontal oil development well was brought online and produced at an initial flow rate of 450-500 bopd.
Based on the current outlook for drilling and connection activity during H2 FY23, Beach is expecting full-year Western Flank oil production decline of ~10% from FY22 production of 3.4 MMbbl. This compares with the beginning-of-year target for flat oil production in FY23. The revised outlook reflects a deferral of production which is principally related to weather and operational delays, with reservoirs performing as expected.
Drilling results
The final two wells of the four-well oil appraisal campaign in the Martlet field were cased and suspended as future producers. Martlet 8 intersected 3.7 metres of net oil pay in the target Namur reservoir and 1.6 metres of net oil pay in the secondary Birkhead reservoir. Martlet 9 intersected 2.7 metres of net oil pay in the target Namur reservoir. The campaign delivered four future oil producers with work currently underway on facility capacity expansion for connection of the new wells.
A two-well horizontal oil development campaign was completed in the Growler field. Growler 19 and 20 both drilled 1.5 kilometre horizontal sections and were cased and suspended as future producers.
The four-well horizontal oil development campaign in the Spitfire field progressed. Spitfire 12 drilled a 1.2 kilometre horizontal section in the Birkhead reservoir and was cased and suspended. Spitfire 13 came in low to prognosis with results indicating sections of swept reservoir from nearby producing wells. The well was sidetracked to test the final target of the campaign. Spitfire 13 DW1 was drilling ahead at quarter-end.
A Birkhead reservoir fracture stimulation campaign was delivered which comprised four vertical oil wells in the Bauer and Kangaroo fields and two horizontal oil wells in the Kangaroo and Stunsail fields. Flowback is underway and expected to occur towards the end of Q3 FY23. The vertical wells were commissioned in Q2 FY23, with preliminary production results encouraging. The horizontal wells are expected online in Q3 FY23. A second phase of Birkhead horizontal fracture stimulation wells is under consideration for FY24.
Cooper Basin JV
Production
Total oil and gas production of 1.8 MMboe was 8% higher than the prior quarter. Gas and gas liquids production of 1.5 MMboe and oil production of 242 kbbl were 7% and 9% higher than the prior quarter, respectively. Active drilling, well connections and optimisation initiatives supported increased production during the quarter. Additional workovers and unplanned maintenance have increased expected operating costs, which will be reflected in Beach’s FY23 half-year results.
Drilling results
Beach participated in 39 wells, with three wells drilling ahead at quarter-end. An overall success rate of 92% was achieved (wells cased and suspended or completed as future producers) and included six gas appraisal wells, 15 gas development wells, seven oil appraisal wells and five oil development wells.
Drilling activity included completion of the oil appraisal and development campaign in the Coorikiana field. Eleven shallow oil wells were drilled during the quarter and the campaign delivered 14 successful wells from 15 drilled. A 13-well gas development campaign in the Big Lake field commenced with the first two wells cased and suspended as future producers (Big Lake 161 and 162).
Moomba CCS
The first two Moomba CCS wells were drilled and cased as future injector wells (Marabooka 19 and Strzelecki 36), with Strzelecki 35 drilling ahead at quarter-end. The Moomba CCS project remains on schedule for first CO2 injection in 2024, with 40% of works now complete. Earthworks for the Moomba CCS project were completed and key equipment packages continued to arrive onsite during the period.
Taranaki Basin
Production
Total gas and gas liquids production of 449 kboe was 29% below the prior quarter, mainly due to a planned three-week Kupe Gas Plant shutdown to enable the four-yearly statutory integrity inspection of the amine system and the first annual statutory inspection of the new inlet compressor. Lower customer gas nominations were experienced towards the end of the quarter following heavy rains which increased hydro power generation capacity. Average sales gas production during the quarter was 42 TJ/day gross (Q1 FY23: 60 TJ/day gross).
Development
Various opportunities to increase well productivity and production rates are being assessed. Subsurface analysis, planning and regulatory activities continued during the quarter for the drilling of the Kupe South 9 development well. Spudding of Kupe South 9 in Q2 FY24 is targeted, subject to joint venture and regulatory approvals and rig access. The well has potential to return the Kupe Gas Plant to capacity gas processing rates of ~77 TJ/day.
Bass Basin
Production
Total gas and gas liquids production of 192 kboe was 11% below the prior quarter, mainly due to unplanned outages at the Lang Lang Gas Plant and extended Yolla production recovery.
Planned compressor maintenance is scheduled for the end of Q3 FY23 which will see the Lang Lang Gas Plant offline for approximately one week. Wireline intervention work on the Yolla 6 well will be undertaken during this period.
Yolla West infield opportunity
Well planning activities and review of rig availability for the Yolla West infield opportunity continued during the quarter. Drilling of Yolla West in the first half of 2024 is targeted.
Trefoil, White Ibis and Bass discoveries
Assurance review of mapping and seismic interpretation of the Prion 3D seismic survey was undertaken during the quarter. Final inversion results are expected in Q3 FY23 which will better inform development opportunities for the Trefoil, White Ibis and Bass discoveries.
Corporate
Retirement of directors
On 10 October 2022, Beach announced that directors Mr Colin Beckett and Mr Robert Jager intended to retire from the Beach board at the company’s Annual General Meeting, held on 16 November 2022. Mr Beckett joined the Beach board in April 2015 and was appointed deputy chair of the board and chair of the Remuneration and Nomination Committee in February 2016. Mr Jager joined the Beach board in December 2021 and elected to retire due to family health issues.
Proposal to acquire Warrego Energy
On 14 November 2022, Beach entered into a Scheme Implementation Deed with Warrego Energy Limited (ASX: WGO, Warrego) to acquire all the issued shares in Warrego for $0.20 cash per share plus any net proceeds received from the sale of Warrego’s Spanish assets (Offer) 2 . Beach increased its cash offer to $0.25 per share on 2 December 2022 after Warrego received an off-market takeover offer from Hancock Energy (PB) Pty Ltd (Hancock). Hancock followed this announcement with a revised off-market takeover bid which was determined to be a Superior Proposal by Warrego’s board of directors. Beach determined not to exercise its matching rights under clause 11.5 of the Scheme Implementation Deed and notified Warrego of this decision on 9 December 2022.
Authorisation, disclaimer and other information
Authorisation
This announcement has been authorised for release by the Beach Energy Board.
Reserves disclosure
Beach prepares its petroleum reserves and resources estimates in accordance with the 2018 update to the Petroleum Resources Management System sponsored by the Society of Petroleum Engineers, World Petroleum Council, American Association of Petroleum Geologists and Society of Petroleum Evaluation Engineers (SPEPRMS).
The estimates in this report are based on, and fairly represent, information and supporting documentation prepared by, or under the supervision of, Ms Paula Pedler (Head of Reservoir Engineering). The estimates have been issued with her prior written consent as to the form and context in which they appear. Ms Pedler is a fulltime employee of Beach Energy Limited and has a BE (Hons) degree from the University of Adelaide. She has in excess of 25 years of relevant experience and is a member of the Society of Petroleum Engineers.
The reserves and resources have been estimated at 30 June 2022 using a combination of probabilistic and deterministic methods. Each category is aggregated by arithmetic summation.
Perth Basin reserves are generally stated net of fuel, flare and vent at reference points defined by the custody transfer point of each product. Waitsia reserves include 30 PJ of fuel used for LNG processing through the NWS facilities at Karratha between the second half of 2023 and the end of 2028. Conversion factors used to evaluate oil equivalent quantities are sales gas and ethane: 171,940 boe per PJ, LPG: 8.458 boe per tonne, condensate: 0.935 boe per bbl and oil: 1 boe per bbl.
Disclaimer
This ASX announcement contains forward looking statements that are subject to risk factors associated with oil, gas and related businesses. It is believed that the expectations reflected in these statements are reasonable but they may be affected by a variety of variables and changes in underlying assumptions which could cause actual results or trends to differ materially, including, but not limited to: price fluctuations, actual demand, currency fluctuations, drilling and production results, reserve estimates, loss of market, industry competition, environmental risks, physical risks, legislative, fiscal and regulatory developments, economic and financial market conditions in various countries and regions, political risks, project delays or advancements, approvals and cost estimates.
All references to dollars, cents or $ in this announcement are to Australian currency, unless otherwise stated. References to “Beach” may be references to Beach Energy Limited or its subsidiaries.
Certain planned activities are subject to joint venture approvals. References to planned activities beyond FY23 are subject to finalisation of work programs, Government approvals, joint venture approvals and Board approvals.
